Worker turnover, industry localization, and producer size

Empirically, large employers have been shown to devote greater resources to filling vacancies than small employers. Following this evidence, this paper offers a theory of producer size based on labor market search, whereby a key factor in the determination of a producer’s total employment is the ease with which workers can be found to fill jobs that are, periodically, vacated. Since the geographic localization of industry has long been conjectured to facilitate the search process, the model provides an explanation for the observed positive association between average producer size and the magnitude of an industry’s presence within local labor markets.